Thinking in Limits: Two Simple Questions for Becoming a Better Entrepreneur

In April 1916, Robert Updegraff published his first ever article in the Saturday Evening Post.

Titled “Obvious Adams: The Story of a Successful Businessman,” the article was converted into a book and heralded by the New York Times as “the handbook for the young man who is going to seek his fortune in the advertising business.” Jack Trout, author of the New York Times Bestselling 22 Immutable Laws of Marketinglauded it as “the best book I have ever read about marketing.”

What was so insightful about Updegraff’s forty page article cum book?

It called, as the title suggests, for businessmen to do the obvious.

Someday a lot businessmen are going to wake up to the power and sanity of the obvious.
Study most of the men who are getting salaried of upward of one hundred thousand dollars a year [Editor’s Note: $2,262,611.65 in Inflation Adjusted Dollars]. They are all nearly doers of the obvious.”
Picking out the obvious thing pre-supposes analysis, and analysis pre-supposes thinking, and thinking is the hardest work many people ever have to do, and they don’t like to do any more of it than they can help. They look for a royal road through some short cut in the form of a clever scheme or stunt, which they call the obvious thing to do; but calling it doesn’t make it so.
They don’t gather all the facts and then analyze them before deciding what really is the obvious thing, and thereby they overlook the first and most obvious of all business principles. Nearly always that is the difference between the small businessman and the big, successful one. Many small businessmen have an aggravated case of business astigmatism which could be cured if they would follow the obvious course of calling in some business specialist to correct their vision and give them a true view of their own business and methods. “

After reading Updegraff’s conclusion, I found myself largely nodding in agreement, yet naggingly unconvinced.

But how do we do the obvious, or rather, why do we so often ignore the obvious? Why do we forego the easy kill in pursuit of day old tracks?

Thinking in Limits

In the 1980s, Creative Output, an Israeli company, developed the first software package that sped up scheduling for production environments.

In the process of setting up and installing the software, one of Creative Output’s founders, Eli Goldratt, found that frequently the software failed to live up to its potential because of existing habits of employees and managers.

Despite the software offering them obvious solutions to improving production speed, the pre-existing paradigms of the managers kept them from implementing the software successfully.

Goldratt, frustrated by the inefficiency, holed up for 13 months to write The Goal which laid out his Theory of Constraints which states that any system with a goal has one limit and worrying about anything other than that limit is a waste of resources.

If a factory has an assembly line with three sections and two of those sections can produce 100 units per hour while the third can only produce 50 units per hour, any investment outside of improving the third section won’t improve the outcome. Doubling the first two to have the capacity to produce two hundred units per hour while the third can still only produce fifty still only produces fifty units per hour.

I’ve come to see that limits play an enormous role in any system including entrepreneur’s day-to-day lives and businesses.

I’ve found that thinking in limits is frequently the best way to identify, and do, the obvious.

Once I’ve defined the problem as a system with limits, I have the desired outcome that I can think backward from to see what the limits are and re-allocate my energy to address the appropriate limit.1

2 Simple Questions for Getting Unstuck

Once we’ve defined the problem, there are two obvious questions.

  1. What’s the current limit?
  2. What’s the obvious way to improve the limit?

Let’s apply the framework to a few small problems first — how to be healthy, wealthy, and have lots of friends.

The Secret to Health: More Sleep, Fewer Scones

This year we’ve made it our New Year’s resolution to get in shape. This is the year that we’re finally going to get healthy.

So we join the gym, put together a workout plan, and order all the right supplements. We’ve got protein powder, creatine and everything else we read about on the internet that we “need” to get in shape.

We stick to the workout plan. We hit the gym 6 days a week. After a couple of days, we haven’t noticed any improvements though. We keep going. After a month, still nothing.

  1. What’s the limit?
  2. What’s the obvious way to improve it?

While we’re going to the gym six days a week, we’re going at 5 am which means some days we only sleep five or six hours if we were up late the night before. We also treat ourselves to a scone from Starbucks after every workout.

An hour running on the treadmill will burn 400 calories. A scone from Starbucks has 400 calories which means we’re probably not going to lose any weight. The hormonal benefits of exercise are being counteracted by the lack of sleep. We’re spending more and more time exercising when the limit isn’t exercise at all.

If we fix our sleep and diet then we’ll get better results with the even less exercise. By cleaning up our diet and getting an extra couple hours of sleep every other night, even with no or a very modest amount of exercise, we start to see the pounds drop off.

Instead of spending two hours in the gym every day, an hour in the gym every other day suddenly yields better results because we’ve addressed the appropriate limits.

Relationships: On Small Talk and The Magic of Brunch

About a year ago, I realized I was bad at first impressions.

I started focusing on and thinking about how to get better at the first 2 minutes of conversation with someone.

I started acting more honest and authentic with people right from the start. I got better at, and started enjoying, small talk. Over the past year, I’ve been fortunate enough to meet and get to know a lot of really cool people as a result of working on that skill.

It got to the point where I felt like perhaps the thing I was most deficient in was deeper relationships.2 I started a new tradition of hosting brunch every Sunday wherever I was with whoever I knew in town.

It’s become a structured habit that lets me spend more time with people that I’m fortunate to know.

I was poor at relationships so I asked myself:

  1. What’s the limit?
  2. What’s the obvious way to improve it?

Wealth: How Facebook Meme’s Can Make You Rich

When I’m designing a marketing funnel or looking at a business, I like to use Perry Marshall’s Traffic, Economics, Conversions tactical triangle for determining the limit of the system.

Is the business getting enough traffic? Is it converting the traffic well? Are the fundamental economics of the business model solid (ie. Will it operate profitably at an achievable scale?)

Once I figure out where someone is on all three of those points and then benchmark against industry averages, it’s relatively easy to figure out what the limit is and what obvious action will yield the best ROI.

For example, I know based on Noah Kagan and App Sumo’s email 1k course that most websites can convert roughly two percent of visitors into email subscribers.

I know that email subscribers are the most valuable asset for a business from a marketing perspective because email marketing has a 4,300% ROI. If a business is only converting half a percent of visitors into email subscribers, then adding an email opt-in is a very good investment.

If a business is already converting two percent of visitors into email subscribers but not getting enough traffic then traffic is the limit.

Where does most traffic in their industry come from — PR? Social Media? SEO?

Social Media. What’s the most effective social media channel? Facebook.

What’s the most effective promotion strategy on Facebook? It’s writing and sharing a compelling piece of content each week with an optimized headline and image.

So the highest ROI thing they can do in the next week is write something compelling on Facebook and optimize the headline and image or meme.

Redefining Entrepreneurship

When we define something as an event or binary — healthy or unhealthy, wealthy or poor, happy or unhappy, we’ve defined it too broadly to make any progress.

If we’re unhappy and we want to get happy, then we just have to ask:

  1. What’s the limit?
  2. What’s the obvious way to improve it?

If we instead view it as a system with resources and inputs, it’s empowering.

Growing up, I never self-identified as an entrepreneur. No one in my family was an entrepreneur. When I got into entrepreneurship, I spent two years asking myself, “Am I an entrepreneur?”

That isn’t a helpful question to ask though. It’s a lot more fruitful to discuss how to become more entrepreneurial.

Entrepreneurship is a skill set, a resource that I gradually acquired (and am very much still in the process of acquiring).

By painting entrepreneurship as binary, 1 or 0, yes or no, there’s an implied large barrier to entry. It feels like an identity change that has to happen overnight.

But that’s not really the case. People evolve to become more entrepreneurial gradually.

Entrepreneurship is a resource that individuals can accumulate. Just as we learn to eat healthier day by day or increase website conversions a half percentage point at a time, so too can we become more entrepreneurial.

We think of knowledge or skills such as product management or sales or marketing as resources, but we still don’t think of entrepreneurship that way.

Yet it’s just as much a resource as any skill like product management or marketing.

We typically don’t think of entrepreneurship as a resource because it doesn’t lend itself to being quantifiable or easily defined.

On the other hand, it’s relatively easy to figure out how much land or capital someone has.

Over the course of the 20th century, we’ve developed credentialism as a way to define how much knowledge there is. There’s a lot of letters we can put after our name and plaques that we can put on our wall to show how much knowledge we have as a resource.

This wasn’t always the case. If someone wanted to become a doctor in 1900, it wasn’t a legible path like it is now.

How do I get into a university? What do I have to do to get into med school?

Now there are standards for all those things, but at the time, there weren’t.

Right now, there’s no way to measure entrepreneurship. No one would ever write “two years experience in entrepreneurship” on their resume (though that may be mostly because they wouldn’t apply for a job if they wanted one, they’d find a way to go to the CEO and negotiate for it).3

Just as it became more obvious how to become a knowledge worker, we’re starting to see the emergence of more legible paths for becoming more entrepreneurial.

Individuals can go from freelancing on the side, to consulting full time to productized services to proprietary products.

Ramit Sethi teaches individuals how to get side hustles going and make an extra 1k/month.

He knows that once these guys have side hustles going, then they’ve built up an entrepreneurial skill set and they’ve got momentum behind them.

Different roles fall in different degrees along the spectrum between knowledge work and entrepreneurial work. These are all made up numbers and made up titles. There are certainly consultants that are more entrepreneurial than founders or people working inside companies that may be more entrepreneurial than a freelancer.

The Hoffman Heuristic

In an interview with Jason Calacanis on This Week in Startups, LinkedIn founder Reid Hoffman looked back over his career and cited his biggest career mistake as not leaving Microsoft for Netscape.

At the time, he believe it was important to learn to be a product manager and there was no way he could have become a product manager at Netscape, so he stayed at Microsoft.

Looking back, he said that he should have gone to Netscape as a mail clerk. At the time, Netscape was where all the innovation was happening. It was spouting out entrepreneurs.

The right question wasn’t “how can I learn to be a product manager?” It was, “how can I get in the building at Netscape?”

Once we transition to viewing entrepreneurship as a resource we can acquire just like we can acquire money or knowledge or relationship skills, then the question goes from “How do I become a successful entrepreneur?” to

  1. What’s the limit to becoming a better entrepreneur?
  2. What’s the obvious way to improve it?

For Reid Hoffman, it was “How can I get in the building?”

What’s yours?

This essay was originally published on TaylorPearson.Me

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